Kuala Lumpur: Hong Leong Investment Bank Bhd (HLIB) has indicated that Malaysian banks are likely to remain among the more appealing sectors for investors seeking refuge amid trade tensions initiated by United States President Donald Trump. The bank highlighted the sector’s strong dividend yield of 5.0 per cent as a significant factor, offering a cushion against capital downside and providing a stabilizing price floor amid market volatility.
According to BERNAMA News Agency, the investment bank noted that valuations in the Malaysian banking sector remain reasonable, with a resilient earnings outlook. HLIB has adjusted its 2025 gross domestic product growth forecast for Malaysia to 4.0 per cent from an earlier projection of 4.9 per cent. The bank also anticipates that Bank Negara Malaysia may lower the overnight policy rate (OPR) by 25 basis points to 2.75 per cent in the second half of 2025 to bolster growth.
While reductions in the OPR typically result in margin compression for banks, HLIB suggests that the impact might be more contained compared to previous unexpected cuts. This is attributed to banks likely adopting a proactive strategy by shortening fixed deposit tenures for quicker repricing at lower costs and moderating fixed deposit growth to avoid overexposure before adjustments.
HLIB further expects that within six to nine months following an OPR cut, campaign fixed deposit rates may moderate significantly, enabling banks to enhance their net interest margin (NIM) expansion. Despite this, HLIB estimates that each 25 basis point policy rate cut could compress the sector’s NIM by 5.0 to 6.0 basis points.
On the non-interest income side, HLIB states that OPR cuts have historically aided trading gains, especially through improved performance in government securities. The bank projects a 0.6 per cent increase in banking sector profit for every 1.0 per cent rise in non-interest income.
HLIB maintains ‘buy’ ratings on several banks, including Affin Bank (target price: RM3.15), AMMB Holdings (RM6.30), BIMB (RM3.05), CIMB (RM9.20), Maybank (RM11.35), Public Bank (RM5.30), and RHB Bank (RM7.80).